In the latest sign that long distance calling business is not long for this world, the Federal Communications Commission (FCC) has told the three incumbent carriers in the U.S. that they may consolidate their local and long distance services into one operation.

Up until now, the Baby Bells were required to operate their local and long distance services as separate businesses. The regulation was meant to prevent them from pricing out other long distance companies from particular markets.

The choice was to either separate local and long distance into two different businesses or be subject to price regulations. AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), and Qwest Communications International Inc. (NYSE: Q) all went for the first option.

Allowing the telcos to consolidate their local and long distance services will help margins since it will remove duplicate marketing and customer service staff. However, with traditional wireline long distance services giving way to wireless and VOIP offerings from cable companies and standalones like Vonage Holdings Corp. (NYSE: VG), the effect won't be as significant as if it had come 10 years ago, according to the carriers.

— Raymond McConville, Reporter, Light Reading